Saturday, October 15, 2016

Can ObamaCare be fixed?

Obamacare has some structural issues that may not be easily fixed.

After a year on Obamacare, it is interesting to see how it plays out. We've spent nearly $14,000 on premiums, which is a lot of money for someone who made hardly three times that amount the year before. We have yet to file our tax returns and see how much we "get back" in terms of a tax credit, so we don't understand the real costs involved. It may be that our actual cost, after the tax credit, is less than what we were paying before provided we don't go above the artificial cutoff of around $63,000.

Fix #1 for Obamacare - cutoff the cutoff. As I noted before, the Obamacare subsidy tapers off with income until you hit about $63,000 and then it dies completely, leaving people in a situation where they end up paying thousands more in taxes than someone making a dollar less. It makes no sense until you realize that no one thought premiums would go this high. Rather than a "cliff" cutoff, the subsidy should taper off gradually so the middle-class doesn't get socked for making a dollar more than 63 grand.

Fix #2 for Obamacare - connect the disconnect. The other problem with a tax credit is that most people in the USA have no idea what a tax credit is or how it works, as I have noted time and time again. Taxes are a mystery to most people. So when you get a huge health insurance hike and then are told "you'll get a tax credit" most people don't see the connection, but instead only the huge bill they cannot pay. Rather than force people to apply for tax credits, the premiums should be based on your last year's Adjusted Gross Income and the subsidy then obtained directly from the government to the insurance company. This way, citizens can see directly the actual cost (to them) of their plan.

(NOTE: Some have pointed out that at the present time you can have your premiums reduced by the subsidy directly by estimating your income for next year and then, at the end of the year, correlating this with your tax returns. The problem with this approach is that if you underestimate your income, you may end up with a HUGE tax bill, particularly if you go over the $63K subsidy limit. For self-employed people - who are covered under Obamacare - estimating your next years' income is difficult at best. Why not use last years' actual income instead? It is a known quantity and there is no need to make corrections at the end of the year or have unexpected "gotchas" at tax time).

Of course, both of these "solutions" fail to address the high costs and the lost revenue to Uncle Sam.

One other problem with Obamacare is that people are making what in some instances is a rational choice to just pay the fine rather than get coverage. If coverage costs $14,000 a year and you are healthy, and you can basically sign up for Obamacare almost anytime once you get sick, it make "sense" to just go without coverage and then sign up when you do become seriously ill. Since "pre-existing conditions" are covered, your new illness will be covered by Obamacare.

So, for example, if you are like me and go to a doctor twice a year for a checkup and that's about it, it might make "sense" to drop Obamacare coverage and pay the tax fine. If you become ill later on, well, you just sign up for Obamacare and you are covered. Even though the sign-up "window" is only once a year, some "life changing events" such as moving to a different county, might allow you to sign up even outside this window. A lot of people are making this rational choice.

I am not suggesting it, of course. If you do have to wait until December to sign up, and you get sick in January, you can run up hundreds of thousands of dollars in bills in the interim.

Another option is to get the cheapest plan possible - a stripped down HMO plan from Humana for $800 a month (still a lot of money) and then if you get seriously ill, simply upgrade to a platinum plan at the annual window. Obamacare is, as some wags have put is, akin to selling life insurance to dead people - or car insurance to folks after they got into an accident (and then paying out for that accident).

Fix #3 for Obamacare - make coverage mandatory. Get rid of tax "fines" and just sign everyone up, period. This of course, may be very hard to do, as we have something called a "Constitution" - mandatory coverage that we have to pay for directly might be a violation our freedom.

Fix #4 for Obamacare - eliminate the tiers. Get rid of "Platinum", "Gold", "Silver" and "Bronze" plans and just have a single plan. With tiering, only sick people will buy the more expensive plans, and those who are not sick will buy cheaper plans - and then upgrade if they become ill later on. There really is no logic to having different levels of health care for different people - and that sort of defeats the idea of "universal" health care. And by the way, most insurers have dumped "platinum" plans already as they are far too expensive.

Of course, none of these solutions address the fundamental problem - spiraling costs. Drug companies have famously doubled, tripled, or quadrupled the "retail" prices of some drugs, knowing that Obamacare will pay whatever they decide to charge for their drugs. When people cry out injustice, they offer "generic" versions or coupons for those who are poor. Those versions are not sold to Obamacare, however.

The insurance companies are not making money on Obamacare. Doctors are not making money on Obamacare - except perhaps some specialists. Drug companies are cleaning up as they can sell all the opioids they want to, and get the government to pay for it. Uncle Sam is now the nation's largest drug dealer, and we are all paying for it - sometimes with our lives.

Fix #5 for Obamacare - set drug prices. Medicare already does this, telling drug companies what they can charge for certain drugs. Granted, this is a tricky "solution" as if we remove the profit incentive from the pharmaceutical business, the incentive to research and test new drugs may evaporate.

Fix #6 for Obamacare - stop drug dealing. The opioid "epidemic" in the USA is a legal drug problem. Doctors are writing prescriptions for various opioids and getting people - ordinary people - "hooked" on the drug. They then graduate to heroin and then to overdosing and death. We simply need to rein in prescriptions for these drugs - as we did in the past for medical cocaine and morphine.

But even with all of these "fixes" I am not sure the problem will be solved. And if you implemented all of these "fixes" you would end up with, well, Medicare - a "single-payer" national health insurance system, like they have in Canada or Europe.

And therein lies the problem - is this what America wants? Some have argued that Obamacare was designed to fail - but both sides of the political spectrum. Republicans want it to fail so we can go back to the "good old days" of insuring only healthy people. Democrats want it to fail so that a "single payer" national health insurance system looks more attractive.

Even if you could get this idea on the table, some powerful interests would fight tooth and nail to prevent it from being implemented.

Sadly, neither candidate seems to have articulated a concrete plan of action to fix or replace Obamacare, other than vague promises to make it work or come up with something "beautiful" and "excellent" to replace it with.

In the meantime, the "window" for Obamacare is coming up again this year, and we are hearing noises of 20% premium increases already. I may have no choice but to make the logical decision to change to the cheapest HMO plan I can find and then change to a "gold" plan later on if I get ill. Since my doctor died this year, there is little need to stick to the plan I have, since I will be forced to change doctors anyway.

Of course, plan B is to simply drop coverage entirely, although that sounds a bit extreme in my circumstances. I will have to see how it plays out in the tax credit department first, before I make a decision, so I can understand the real costs (to me) and make a logical choice.